REL 2001 Policy Forum
Financing Quality Education: Resources, Changes, and Challenges

October 25-26, 2001
Albuquerque, NM


Overview of School Finance and Resource Allocation
Sheree Speakman, President and CEO of Fox River Learning

School finance is a complicated issue that has gained interest because of recent pressures to tie student performance to resources. Those educators who have expertise in teaching and learning and those who have expertise in financial matters have historically been separate, further challenging the current need for an integrated approach to resource allocation.

The first step in pursuing effective resource allocation at the school, district, and state levels is to determine exactly where money is being spent. Speakman demonstrated an accounting method that draws from a cost-accounting approach. The method breaks down spending into categories, such as "fund functions," "school," and "student," so that the analyst can determine exactly who benefits from spending and how spending is connected to teaching and learning. Other tools can contribute to better resource allocation. For example, a recent project commissioned by the Milken Family Foundation called Reading Programs that Work resulted in a cost-benefit analysis of reading programs.

Effective data systems are critical to making informed decisions about resources. A collection of papers published by the National Center for Education Statistics called "Selected Papers in School Finance 2000-01" (Hartman, Bolton, and Monk, 2001) provides a useful framework for thinking about data usage. Researchers, accountability experts, policymakers, school improvement teams, and others need these data. A state data warehouse should ensure that data collection and reporting accommodates the needs of a wide range of users.

Finally, Speakman emphasized the need to link accountability for improving student performance to decisions regarding the effective allocation of resources. For example, if teaching and learning decisions are made by teachers based on classroom needs, yet spending to support instruction is based on state formulas, there may be a disconnect between student needs and the application of necessary resources.

State Views on School Finance Issues
State Discussion Groups

Group discussion participants met with colleagues from their states to answer three questions regarding resource allocation policy:

  1. What are the pressing resource allocation issues in our state?

  2. How has state policy addressed these issues?

  3. How do we know whether the policies are working?

State groups reported the following information after their discussions:


Policymakers face an adequacy lawsuit that creates uncertainty in the school funding system until the court issues a ruling. Once the court makes a decision, a state commission will hold discussions to respond to changes. Other resource issues in Arkansas include the state economic situation, teacher supply and quality, deteriorating school facilities, reorganization of schools, and public expectations regarding education. Legislative term limits also are creating new challenges as new lawmakers learn the basics of education finance.


Adequacy is a major issue following a ruling by the Louisiana Supreme Court in a school finance lawsuit. A new school finance commission is reviewing the funding formula and the link between funding formulas, performance, and accountability.

New Mexico

The state faces a school finance lawsuit on the uniformity of resources for capital outlay. Lack of sufficient funds for education also is an issue for the state, as well as fund volatility due to dependence on gross receipts taxes. Teacher salaries are low and teacher shortages exist, especially for bilingual educators. New Mexico education officials are implementing full-day kindergarten and are concerned about the costs associated with that program. They will phase in performance-based budgeting this year.


The most pressing issue is the lack of funds for education. Per-pupil expenditures and teacher salaries are low, compared with the national average. District and school administrators may lack the knowledge to more effectively manage fiscal resources. One goal in the state is to purchase the best education for every child instead of simply trying to increase dollars from year to year.


School finance is an important issue for state leaders for a number of reasons. State leaders are concerned about the fairness of the finance system's structure, including funding for facilities and transportation. In addition, school districts are pressuring the state to carry a greater share of the cost of education. A static cost of education index also creates uncertainty at the district level because the formula is not flexible enough to reflect a changing economy. An interim committee on school finance will investigate these issues before the 2003 legislative session.

Federal Role in Financing Education
Joe Johnson, Ph.D., Director of Compensatory Education, U.S. Department of Education

Johnson explained the changes in the tone and direction of federal financing of public education. This year's reauthorization of the Title I program will increase the focus on student performance results with three main strategies:

  1. High state standards and articulated expectations for all children

  2. Alignment of standards to assessments in every state

  3. Creation of an accountability system in each state

One federal issue regarding standards is that although standards are developed at the state and district levels, they may not influence classroom instruction if educators do not carefully examine performance data from tests aligned with standards. This is especially critical in schools that most need Title I resources.

Current Title I policy requires periodic assessments (grades 3-5, 6-8, 9-12); however, only 16 states fully comply with those provisions of the 1994 law. Expected changes in the new legislation include the elimination of waivers that allow states to continue receiving assistance without compliance with the assessment requirements. The new law will also require annual testing of children in grades 3-8. The emphasis on testing is a key component to help schools improve instruction. Based on an understanding of the strategies of successful schools, Johnson stressed that results of performance on tests that are aligned with standards can identify areas of student need and help determine whether instructional goals are being met. The new law will also integrate a new definition of adequate yearly progress that carries a federal response to schools that are not meeting the definition. Johnson explained that this strategy is especially important to help change school cultures, citing those schools that have remained low-performing for so long that the sense of urgency to improve has waned. A low-performing label can stigmatize a school or even create the perception that "low-performing" defines the children themselves. Other provisions that states should expect from the new Title I law are tighter timelines for school improvement, severe consequences for successive years of non-improvement, more flexibility in the use of funds through school-wide programs, and achievement-based monitoring with increased monitoring of states with the highest need for improvement.

Johnson ended with the message that in order for Title I assistance to have the greatest impact on learning, effective state and local leadership is essential. The federal policy can set the context for change, but it will be the state and local response that will improve student learning.

Current School Finance Research
Panel Discussion

Current Context of Resource Allocation and School Finance
Catherine Clark, Ph.D., The Charles A. Dana Center at The University of Texas at Austin

Catherine Clark helped participants better understand the context for thinking about resource allocation issues. First, she addressed the important question, ìHow can we spend the same amount of money in the same function categories yet improve student learning?î Research can help determine what resource allocation strategies pay off and which spending practices are effective. For example, research on spending for professional development indicates that most dollars spent result in low-utility activities rather than being concentrated on one or two high-priority topics.

Clark then considered the concept of resource reallocation, or taking the available resources and allocating them to different areas. National tests indicate that less than one-third of students are scoring at "proficient" levels or higher in core content areas. If the goal is to double or triple performance, the reality is that the change will have to occur with roughly the same level of resources now available. Schools will not have resource levels that double or triple. A number of cost-analysis tools can help decision-makers reallocate for more efficient use of scarce resources. Resource cost models, cost-benefit analysis, and cost-effectiveness analysis can aid decision-makers in resource reallocation.

Lastly, Clark explained that federal and state finance policies are moving toward results-based accountability, creating an atmosphere in which new money may not be granted without evidence that the increased spending will accomplish state education goals.

The Current State of Accounting in U.S. Education
Sheree Speakman, Fox River Learning

Sheree Speakman presented five points she has learned from working with schools and districts over the past seven years.

  1. A poverty mentality characterizes some school and district finance systems. In one public school system, she heard a chief finance officer complain of annual budget cuts when in reality the budget grew every year.

  2. School district budget presentations should show all revenue available for important expenditures, such as professional development, transportation, and Title I programs, so decision-makers have an accurate picture of the resources actually available.

  3. School district staff need to be involved in the budget process to know how much revenue is available and to plan for its effective use.

  4. The trend of education funding in the 1990s has been one of budget increases. This has created the expectation that budgets will always increase, making the psychological shift to reallocation of existing resources more difficult.

  5. Full accrual accounting and implementation of GASB 34 will help decision-makers better understand the full revenue and expenditure picture. Once the new financial reporting requirements are implemented, Speakman recommended that districts form two teams. An efficiency team should examine ways to cut costs and increase efficiency in non-instructional areas such as transportation, maintenance, and food services. Then, an instructional effectiveness team should look at the effectiveness of instructional programs based on performance data.

Research Needed to Improve the Financing of Quality Education
Joe Johnson, Ph.D., U.S. Department of Education

Joe Johnson explained that the most common response to the demand for higher student performance is a request for more money. The mood in the U.S. Congress, however, reflects an assumption that there is already enough money in the system to create improvements if the money were used more effectively. In light of this new environment, research should be focused on identifying cohesive, constructive, and coherent approaches that encourage reform.

New research needs to ask the following questions:

  1. What features of a system encourage an effective response as opposed to a dysfunctional response to greater accountability for student performance?

  2. How do we support the student performance goals we set?

  3. In what ways should we support existing allocation and how do we think about reallocation?

  4. How do we determine educational effectiveness and costs effectiveness?

Districts that are achieving good results should be examined and their successful practices should be communicated to other educators. The promotion of best practices should support more holistic and innovative problem solving. We should also take evidence of positive results to the U.S. Congress to gain continued federal support.